Capital Budgeting Flashcards
1
Q
The rate of return required by investors to compensate them from deferring current consumption is
A
Risk free rate
2
Q
The risk free rate does not change as the
A
Perceived risk of an undertaking increases/decreases
The risk premium increases as the predicted risk increases
3
Q
Profitability index method is used to
A
Evaluate investment projects
4
Q
Method used for capital rationing is
A
Profitability index
5
Q
A graph of the relationship between Finnish risk and expected financial reward would be
A
Positive sloped
